Student loan rate hike stopped, but that doesn't make college affordable

College students can breath a sigh of relief now that Congress has finally agreed on legislation to keep interest rates on federal student loans from doubling to 6.8 percent this school year.

The Senate passed a compromise bill Wednesday night that ties federal student loan rates to the yield on 10-year Treasury notes. That means undergraduates will pay an interest rate of 3.86 percent on loans taken out this year; grad students will pay 5.41 percent.

These interest rates will increase as the economy improves, but the legislation caps interest rates for undergrads at 8.25 percent.

The House is expected to pass the bill next week. Everybody is happy, except for a few Democrats who think the federal government somehow will make money off this deal. The White House issued a statement praising the bill, and House Speaker John Boehner, R-Ohio, crowed that "Senate Democrats finally joined Republicans in passing a permanent, market-based solution on student loans."

But keeping interest rates on student loans from rising won't do much to make a college education affordable. In fact, it may make it worse, some conservatives argue.

"By keeping student loan rates artificially low, the federal government is contributing to the rapid increase in college tuition," writes Veronique de Rugy, senior research fellow at the Mercatus Center at George Mason University.

Total student loan debt now exceeds $1 trillion -- it's increased by nearly 300 percent over the past decade, much of that since 2009, when federal student loan rates began dropping.

Saving $100 or so a month on repaying this debt will help Americans a little bit, but it doesn't address the problem that created this huge debt load in the first place: the exploding cost of a college education.

It cost an average of $22,261 for students to attend an in-state public college last year; the "moderate" budget for a private college averaged $43,289, according to the College Board.

With prices like that, it's no wonder student loan debt is exploding.

And it's no wonder that politicians vow to do something about it.

In his economic speech yesterday, President Barack Obama promised to "lay out an aggressive strategy to shake up the system, tackle rising costs, and improve value for middle-class students and their families. It is critical that we make sure that college is affordable for every single American who’s willing to work for it."

Sen. Tom Harkin, D-Iowa, who chairs the Senate Health, Education, Labor and Pensions Committee, says curbing the "runaway costs" of a college education will be a major focus for the committee this fall when it reauthorizes the Higher Education Act.

But controlling college costs "is a lot easier said than done," said Amy Laitinen, a former White House and Department of Education adviser who now is deputy director of higher education for the New America Foundation.

"Those institutions that benefit from the status quo will balk at efforts to change their behavior -- but students and families deserve the opportunity to access the American dream of a high-quality college education at an affordable price," Laitinen said.

But maybe the definition of a "high-quality college education" needs to be changed -- maybe it doesn't involve four years of hanging out on a traditional campus. This seems to be a ripe area for entrepreneurial innovation, but employers will have to step in and support challenges to the status quo, and not just keep hiring graduates from the same old schools.

As my old college adviser, Jimi Hendrix, used to sing, "There must be some kind of way out of here."